Thoughts on the Marriott and Starwood merger
This story has already been widely discussed in the travel community, however we thought we would put our 2 cents in and share our thoughts on the Marriott and Starwood merger.
Last November it was announced that Marriott will be taking over Starwood [the hotel group behind Sheraton, Le Meridien, Westin and St Regis brands, to name a few] in a $12.2 (over £8.5) billion deal which is planned to close in mid-2016. This would make Marriott the world’s largest hotel chain, with over 5,500 hotels in more than 100 countries spread across 30 brands, which from a business point of view does make a little sense, as the combined Marriott/Starwood business will have 30 different hotel brands, and you don’t need to be a top-notch management consultant to realise that — this is far, far too many!
While the merger between Marriott and Starwood is [still] expected to close around the middle of this year, it looks like it might not occur quite as uncontested as we had expected, as last month we learned that a Chinese investor group has submitted an offer to acquire all the outstanding shares of common stock of Starwood paying $76 [£50] per share, which is a better offer than Marriott’s bid.
That being said, the Starwood and Marriott merger is back on as Marriott has recently increased their offer to an estimated $13.6 [over £9.4] billion.
What does the merger really mean for travellers?
Both Marriott Rewards and Starwood Preferred Guest have very loyal followings, so what’s going to happen to the two programmes?
We can’t know for sure [yet] but most definitely there will be only one surviving programme, and we suspect it will be Marriott Rewards, given that it’s more than twice as large as Starwood Preferred Guest. Obviously Marriott Rewards and SPG are considerably different programmes, with different elite benefits, points earning structures, and vastly different points value (we value one SPG point at roughly three Marriott Rewards points).
The truth is that Marriott Rewards is about as unexciting as a hotel loyalty programme can be. We accept that top tier members [with more than 75 nights per year] are generally happy. For everyone else, in terms of promotions, buzz and general interest, it is tumbleweed territory. People are loyal to Marriott, on the other hand, because they have hotels pretty much everywhere. You don’t have to go out of your way to stay at Marriotts, and that’s probably why their loyalty programme isn’t as rewarding.
Starwood Preferred Guest, on the other hand, is one of the most rewarding programmes in the business. Starwood is a relatively small hotel chain, it realised early on that it could use its loyalty programme to make a real difference. You usually have to make a bit of an effort to stay at a Starwood hotel so they wanted to make it worth your while.
So SPG members are going to have the thorny issue of benefits. The top-tier members are generally very well treated [in terms of suite upgrades] — you won’t be getting that under Marriott Rewards. unless the Marriott scheme evolves substantially, there is a real risk that heavy Starwood stayers walk away as they see their benefits disappear. And we’ve already started seeing this happen with quite a few SPG members took advantage of Hyatt and Hilton status match offers.
The good thing is that the deal is only expected to close in mid-2016 (and there is a good chance the deadline will be extended further), so nothing will change overnight; no need to panic or hurry to burn your points.
Bottom line
Although, there is still a tiny chance that both Marriott Rewards and Starwood Preferred Guest will continue to exist independently, much like there is Ritz-Carlton Rewards and Marriott Rewards, even though Ritz-Carlton is a part of the Marriott portfolio, there is no logic in Marriott retaining Starwood Preferred Guest. The acquisition of Starwood will not complete until mid-2016, and we believe that SPG is likely to survive until the end of 2017 at least, and your status will transition over at that point into Marriott Rewards status for 2018.
In general, we do not see this as a great fit. Marriott is probably the most straight-laced company in the business. We can’t imagine anyone ever woke up in the morning and said “I look forward to staying at a Marriott tonight!”. The ludicrously huge photographs of Bill Marriott that hang in the lobby of every hotel in the chain are, frankly, creepy, to say the least. Starwood, on the other hand, is a very well organised hotel with clear positioning of their brands.
We will keep you up to date on the Marriott/Starwood merger progress and you will be able to read about the integration of the two programmes on Heads and Tails as it happens.
So, how do you feel about Marriott taking over Starwood? What do you think it means for their loyalty programmes?
